Japan is finally assembling the regulatory framework needed to turn carbon capture and storage (CCS) into a functioning industrial system. A METI working group has laid out how storage sites will be permitted, financed, monitored and eventually handed over to the state. It is a comprehensive framework designed to reassure investors that CCS can work.

The timing is auspicious. The nine pioneer CCS projects Japan announced last year – four of these with the CO2 stored abroad – are expected to start operations in 2030. This requires final investment decisions in 2026. Even with state support in areas such as the cost of exploratory drilling, the economics for the sector are daunting.

Preliminary estimates commissioned by METI just a few years back indicated that the likely cost of full-chain CCS – capture, transport, storage and decades of monitoring – would begin north of ¥10,000 per ton of CO2, even for onshore, pipeline-connected projects. Meanwhile, nationwide carbon credits, currently traded on a voluntary basis, range between ¥5,000–6,000. Even with aggressive technology development, bridging the gap will likely require additional measures.

Still, CCS remains central to Japan’s 2050 strategy, particularly for industrial sectors with limited options. METI’s new rules create the institutional clarity that a capital-heavy system needs. Paired with the 2024 CCS Business Law, there is a roadmap for how to plan projects, engage local communities, and ring-fence decommissioning funds – before eventually transferring storage sites to JOGMEC for long-term monitoring.